'Fast Money' Recap: Fear of Financials
The U.S. stock market closed a bit to the downside as investors prepared for a week full of earnings reports. The Dow lost 0.2%, the S&P 500 gave up 0.3%, and the Nasdaq gave up 0.6%.
On
CNBC's
"Fast Money" TV show, Guy Adami noted that
Wachovia Bank
(WB) - Get Report
had cut its dividend. He said that previously, the bank had said there was no reason for it to cut its dividend, but that he has learned to be skeptical of what the CEOs of financial firms say. Despite the bad report, the stock is setting up for a trade on the long side with a tight stop.
Karen Finerman said she wouldn't go near the financials, but if she had to go one way or another, she would be long the sector.
Jeff Macke said that it might be worth it to buy
Citigroup
(C) - Get Report
or the
Financial Select Sector SPDR
(XLF) - Get Report
on dips.
3 Stocks I Saw on TV |
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Pete Najarian said that $24.50 is a level of support for the XLF. He said that because the fund reached that level today, he's rotating back into calls. He said there may be more room to the downside, but the $24-to-$27 range has been working in the XLF.
He said he wasn't sure about the prospects for
Bank of America
(BAC) - Get Report
or
Wells Fargo
(WFC) - Get Report
. On the other hand, he said
USBancorp
(USB) - Get Report
should be a good investment, even if it is a little more conservative and boring.
Adami said it's all right for investors to get long anything as long as they have a well-defined exit.
Oil continued to look strong today. Adami recommended plays on
Halliburton
(HAL) - Get Report
,
Schlumberger
(SLB) - Get Report
and
Baker Hughes
(BHI)
.
Najarian recommended
Transocean
(RIG) - Get Report
and
Diamond Offshore
(DO) - Get Report
.
For the Chart of the Day, the traders looked at
Encana
(ECA) - Get Report
. The natural gas company continues to work, they said.
Adami said that natural gas stocks make a 52-week high every day. He said he continues to recommend
Chesapeake Energy
(CHK) - Get Report
and
Devon
(DVN) - Get Report
. He also said
Suncor
(SU) - Get Report
has good diversity of income in oil and gas.
Jeff Macke said he continues to recommend the
U.S. Oil Fund
(USO) - Get Report
. He said the fund is at a 52-week high, and he recommends maintaining half a position because it will continue to rise.
Elsewhere in commodities, Najarian said to buy coal on pullbacks. He highlighted
Massey
(MEE)
,
Peabody
(BTU) - Get Report
,
Alpha Natural Resources
(ANR)
and
Patriot Coal
(PCX)
. Adami recommended
Arch Coal
(ACI) - Get Report
Crocs
(CROX) - Get Report
shares fell in after-hours trading after the company slashed outlook. Finerman said that she believes the shoemaker's overseas business is probably OK, but she supposed the U.S. business must be terrible.
Macke said that the outlook was horrible and that the stock is broken.
Blockbuster
(BBI) - Get Report
announced its intention to buy
Circuit City
(CC) - Get Report
. Macke said that the merger between the two companies is baffling.
Najarian said the news is a great opportunity to sell.
Najarian also predicted that the airlines are due for several mergers. He predicted that
Northwest
(NWA)
and
Delta
(DAL) - Get Report
would get a deal done Tuesday and advised viewers to watch for a merger between
UAL
(UAUA)
and
Continental
(CAL) - Get Report
.
TheStreet Recommends
Citing an upgrade cycle in the airlines, Adami recommended
Kaiser Aluminum
(KALU) - Get Report
.
In the service equipment sector, Adami cited a rebound in shares of
United Technologies
. He also said that numbers from
Eaton
(ETN) - Get Report
were fantastic and said the company offered great guidance. He said the news from Eaton bodes well for United Technologies and
Honeywell
(HON) - Get Report
. Finerman said she wouldn't get into the space.
Adami said that defense stock
Lockheed Martin
(LMT) - Get Report
was trading at $103 but should be at $115. The company reports earnings later in April, and he said its report is a great tell for
Raytheon
(RTN) - Get Report
.
Adami also said that
Johnson & Johnson
(JNJ) - Get Report
is due for a breakout. The stock should trade at the same valuation as
Procter & Gamble
(PG) - Get Report
, he said.
In fertilizer names, Najarian said that the sector is trading at a high valuation, but the price levels don't reflect forward estimates, which should bring down its price-to-earnings ratio. He said that a shortage of potash and urea means those stocks are going higher.
Adami recommended buying
Agrium
(AGU)
because the chart continues to show higher highs and higher lows.
Najarian said there's a lot of short interest in
Terra Industries
(TRA)
. He said investors should not be short these names.
The traders welcomed Jon Merriman, chief executive of Merriman Curhan Ford, to discuss the financial sector as
Merrill Lynch
(MER)
JPMorgan
(JPM) - Get Report
and Citigroup gear up to report.
Merriman said to buy banks, not brokers. He said that capital requirements for the brokers are going to increase, which is a good reason to be short. The banks, on the other hand, he said, are showing signs of bottoming.
Adami said that Wachovia is setting up for a trade with a stop at its 52-week low.
Najarian agreed that Merill Lynch and
Lehman Brothers
(LEH)
are probably good short opportunities, but argued that
Goldman Sachs
(GS) - Get Report
is too good, and he believes the broker is a buy at $165.
Merriman said that he believes the stock is overvalued.
Finerman said she'd get long the banks before she shorted the brokers. She also noted that
Capital One
(COF) - Get Report
has big consumer exposure, and she's short the name.
Najarian pointed out that USBancorp reports earnings tomorrow. He said that investors should buy the stock on any pullback.
Merriman said that
Comerica
(CMA) - Get Report
is his favorite bank to buy and recommended shorting Goldman Sachs. Adami said he would rather short Lehman Brothers than Goldman.
Intel
(INTC) - Get Report
is set to report earnings tomorrow. Macke said that margins are the most important metric for the chipmaker. Then he said revenue would be important. He said that a lowered outlook from
AMD
(AMD) - Get Report
is not good news for Intel. He said he doesn't need the earnings to be stellar but just needs to see a light at the end of the tunnel.
Najarian said he likes Intel as an investment at these levels.
David Kostin, chief investment strategist at Goldman Sachs, said in a statement today that the market is awful right now and is bearish in the short term. Finerman said she didn't know what to make of the assessment. She said she doesn't trade over a short enough term to be influenced by the statement.
Adami said to look at
CSX Corp.'s
(CSX) - Get Report
earnings tomorrow. He said that if the rail company's earnings aren't great, then viewers should wait for
Union Pacific
(UNP) - Get Report
to report.
Najarian said that he agrees with Kostin's assessment if the volatility index breaks out to the upside.
Macke said he's not trading in this environment but rather is making a list of things to buy on dips. Patient investors will be rewarded, he said.
Trader Radar
News Corp.
(NWS) - Get Report
traded on unusual volume today.
On reports that companies are inviting people to sell their jewelry to be melted and that Florida-area retailers are running low on metal detectors, the traders discussed the possibility of a gold bubble. No one on the desk owns gold, they said.
Najarian said he doesn't have any gold positions because he would rather play oil or coal.
Finerman said that there is probably a bit of a bubble in gold.
Adami said that gold is an "expensive doorstop" and pointed out that
Newmont Mining
(NEM) - Get Report
should have exploded on the rise in gold prices but is down 22% since January.
Najarian said that
Bucyrus
(BUCY)
and
Joy Global
(JOYG)
offer another way to play metal mining. They have the equipment that actually extracts metals from the ground, he said.
On returning from her trip to England, Finerman said that the English consumer is more levered than the U.S. consumer. The noted that England is very expensive, even more than the U.S. She said she believes the pound is overvalued, and that it makes sense to short the currency.
Najarian said that Europe is suffering from many of the same problems as the U.S. Macke agreed, saying that "something's gotta give," and it's likely that European currency will inflate soon.
Final Trade
Macke chose Citibank on a dip. Adami selected Wachovia with a tight stop. Finerman picked
Microsoft
(MSFT) - Get Report
. Najarian selected Halliburton.
